Monday, April 30, 2007

Retail marketing has grown from its humble roots as a secondary function to brand marketing, to its position today as a marketing trendsetter. Stores such as Trader Joe’s, Starbucks, Target, and Whole Foods, have done an excellent job of defining their brand and driving it through everything they do. A 2005 Harris Interactive poll shows the’ corporate reputation of many retail brands rank in the top 30 of 60 leading companies. These retailers include Target (25th), Starbucks (23rd), Wal-Mart (29th), Home Depot (12th), Costco (18th) and Best Buy (30th). This puts them in the same league as brand icons such as Pepsi (17th), Apple (27th), and Nike (24th). Little wonder top brand marketers are increasingly making the leap to retail organizations.

Retail research is not just a matter of translating standard brand marketing techniques to retail brands. The differences are based on what is different about retail marketing, and they are important to understand if you are doing retail research.

What’s Different About Retail Marketing? Retail marketing differs from brand marketing in several important ways. Here are just a few: Store brands have more dimensions than product or even service brands such as location, merchandise selection, store design, return policies, etc. Retail marketing objectives and metrics are different (traffic and basket size vs. repeat purchase and loyalty) which translates to different research measures.

The Reputation Quotient study, developed jointly by Harris and the Reputation Institute in New York, was conducted in two parts. Between March and June, 6,977 respondents were asked to name the two companies with the best reputations and the two with the worst. The 60 companies named most often were then rated by 19,564 people in a separate survey between Aug. 30 and Sept. 26. Results were reported in the Wall Street Journal, December 2005.

Retailers often have greater access to consumer behavior data, which makes self-reported behavior information less relevant. The dynamic nature of the retail environment means that retailers have a shorter-term outlook and a greater need for timely information (how are we doing today? What will consumers want tomorrow?).

Retailers have a broader array of direct and indirect competitors. With the Internet approaching 5% of retail spending, a retail store competes not just with other stores in its vicinity, but also with the entire Internet for consumers’ shopping dollars. This makes understanding consumer motivations and decision-making more complex.

What’s Different About Retail Research? With all these differences, it is little wonder retailers have different research objectives and needs. First, brand marketers study consumers, as defined by their relationship to a particular category and relatively finite set of brands. In contrast, retailers study shoppers, as defined by their extremely dynamic behavior relative to an often very large set of competitive stores. This explains why retail research requires larger samples and more frequent measures.

Second, while brand research is focused on product development and promotion, retailers, (who generally enjoy strong awareness and whose store locations and designs are relatively fixed), are more focused on how to drive people to their store more frequently and convert traffic to sales once they are there. This difference explains why mystery shopping, customer shop-alongs, and smart carts that observe customers while they aren’t looking are growing rapidly. It also has implications for sample design. For instance, we have learned it doesn’t make sense to do research with shoppers who are outside a reasonable driving distance from a store, 30 miles for a warehouse club, less for a grocery or convenience store.

Finally, while brand research is focused on questions of how to influence attitudes and perceptions that in turn drive loyalty, and willingness to pay a premium price, retailers are more focused on how to be perceived as the place to shop first for a variety of merchandise types and shopping occasions. This explains why retail research often focuses on issues of merchandising and selection and competitive benchmarking.

Shopper Research Our retail market research experience has lead us to adapt traditional research tools to fit these differences. For instance, we generally recruit larger samples for quantitative research and have more stringent participation criteria for qualitative research. We stress national samples over a few cities. And to avoid lengthy questionnaires, we work with clients’ customer panels or national panels that already have extensive profile information when appropriate.

We also make extensive use of ‘hybrid’ quantitative and qualitative studies. This technique involves fielding a 5-7 minute online screening survey among a very large sample to identify consumers that exhibit the behavior of interest. This allows us to determine the incidence of this group in the larger population and assess their ‘value’ relative to other shoppers. In a second phase of research, pinpointed groups of shoppers selected on the basis of their survey responses are brought together for a real-time, online discussion. This forum is similar to a focus group, but composed of people from all over the country and with the advantages of anonymity for the respondents and reduced interviewer bias.

Multi-channel shoppers We have used the hybrid approach successfully to study many shopping behaviors and shopper types for a major department store retailer that has a significant online business. In one study, the purchasing behavior of frequent multi-channel shoppers were compared to those of less frequent multi-channel shoppers and frequent single channel shoppers.

The study revealed that multi-channel shopping is more pervasive than was originally thought; among the retailer’s core demographic target (women 25-54, household income $75,000+) nearly two-thirds make an online purchase at least once a month and one third make two or more Internet purchases a month. We also learned that heavy Internet shoppers are twice as likely to purchase from catalogs and 60% more likely to be a heavy store shopper.

While this information was useful on its own, the real insights came from talking to heavy multi-channel shoppers. We learned they defy easy categorization, crossing all age, income, ethnic and lifestyle groups; the one unifying theme is their dedication to shopping; they are skilled, efficient bargain hunters who love to shop for the sheer ‘thrill of the hunt’. Heavy multi-channel shoppers move fluidly between online and offline shopping; the shopping process can start anywhere and end anywhere, with circulars, catalogs, store shopping and web shopping each informing and supporting the other channels.

These insights have helped our client to understand how to improve web site navigation and design, how and when to communicate online availability and the importance of reducing barriers to Internet shopping such as shipping charges.

Club Store Shoppers Club stores have an unusually complex mix of shoppers. While anyone can shop at a club, the greatest value is for professionals and small business owners who, according to ACNielsen, account for 38% of warehouse club sales, but account for 51% of sales.

Business owners and professionals are a diverse bunch! They cut across a spectrum of business types from offices to ‘ma and pa’ retailers to schools to church and concession stand volunteers. In order to develop relevant communications for each of these audiences, an online panel to understand and profile the relationship between business type and purchases.

Unfortunately, the analysis raised as many questions as it answered. Why would oranges be among the top items purchased by medical office personnel? Why do schools purchase so little paper? Clearly more in-depth approaches were needed. Using the hybrid methodology described above, individuals were selected to participate in qualitative online group discussions based on their profile. After conducting dozens of groups, patterns began to emerge to explain what drives shopping frequency, basket size and the mix of personal and business items in the basket. These patterns suggested many ideas for more sharply targeted messages and new services.

Summary Shopping research is fundamentally different from standard product or brand research. In many cases, panels can offer an efficient alternative to scanner data alone or traditional methods. They enable more frequent studies, among broader samples and more precise sample selection. Online focus groups can offer dispersed samples and an in-depth approach that provides insights not easily gleaned from analysis of scanner data and surveys. Hybrid designs allow the best of both worlds by putting the shopper group of interest in a larger context without trading off the insights afforded by qualitative research. In general, we’ve learned that it is important to remain flexible and not be bound by traditional brand research techniques and questions. Retail research is unique!

Friday, April 20, 2007

Survey after survey has shown that Marketing ROI is at the top of everyone’s list of the most important issues facing marketers today. In this paper, we explore why ROI is so topical and what marketers need to know about measuring the financial impact of marketing.

1. Why is Marketing ROI such a hot topic right now? Is ROI just another fad or a step in marketing’s evolution as a discipline?

ROMI is hot right now because marketing itself is hot. Companies that have ridden the cost cutting train to the end of the line, have no other strategy to turn to other than improving revenue. Marketing is the only function capable of improving the top line. This usually means more marketing spending. Since marketing is already the single largest expense for most companies, simply adding more marketing cost without showing how it translates into bottom line improvements is unrealistic. It also puts marketing at a disadvantage to other functions that can make those translations.

Even absent the pressure to increase spending, it is becoming more critical to improve the performance of existing marketing investments. “Softer Investments” such as advertising, PR, events and sponsorships that traditionally have proven more resistant to rigorous measurement, are particularly under pressure to prove their efficiency and effectiveness. Media costs have grown at nearly four times the rate of inflation during the last 10 years. CRM, Direct mail, and interactive marketing are all growing, largely at the expense of traditional media approaches due to a perception that they are more cost effective and accountable for bottom line results.

Traditional media formats are, naturally, fighting back by finding ways to put less accountable marketing efforts on a par with those that are more accountable such as direct marketing and interactive. The ARF, ANA and AAAA all have Marketing ROI at the top or near the top of their agendas of issues.

An additional sign that marketers are under pressure to demonstrate ROI is the increasing churn experienced at the CMO level. A recent Spencer Stuart study average tenure for CMOs at the top 100 branded companies in North America is just 23.6 months. Compare this to CEOs, who are in their positions, on average, for 50.6 months. Based on our data, only 14 percent of CMOs for the world’s top brands have been with their companies for more than three years — and nearly half are new to the job over the last 12 months.

April 20, 2007 (AdAge.com) -- Marc LeFar, who shepherded the $1 billion-plus marketing budget of the former Cingular Wireless for the past four years, has resigned from AT&T.

It is a safe bet that these pressures are not going to diminish in the foreseeable future; consequently, the desire to adopt rigorous ROMI methodologies is not likely to be just a fad, but rather a genuine shift in the evolution and practice of marketing. In fact, a recent study sponsored by the ANA where 70% of 222 marketing executives said, “ROI represents a long-term change in how they do business’.

2. Why has it proven so difficult to measure marketing ROI? What makes it different from other disciplines like quality, cycle time, supply chain management or R&D?

Unlike investments in quality, distribution efficiency, improved cycle time, etc. that have direct links to the bottom line, the relationship between marketing investments and financial performance is more elusive. First, there are many factors that influence sales revenue and profitability, many of which have little to do with marketing. Even when it is clear that marketing is that variable that has made the difference, that knowledge alone is nearly useless without an understanding of what worked and what to do differently. Unless the contribution of each part of the marketing effort can be related to the overall impact, it is difficult to make adjustments.

A further complication is that Marketing’s impact tends to lag the investment. For example, the impact of advertising, PR and loyalty programs are expected to be evident over time as well as in the short-term. This is especially true of long purchase cycle categories such as durables and high technology. Because this lag is not well understood, marketing continues to be considered an “expense” for accounting purposes, despite common sense and evidence to the contrary. (An MSI study using cross sectional time series regression analysis over 8 years for 2,552 firms showed that advertising acts as an asset by contributing to a firm’s financial performance for up to three years.)

A final complication lies in the difficulty of applying learning about the impact of marketing on results to predict the financial impact of future marketing investments. Unlike other investments that tend to have finite price tags, marketing investments are infinitely scalable. It is far easier to calculate the return on investment for a piece of machinery, an R&D project, and a new distribution channel where the costs are relatively fixed. In contrast, the same marketing program can cost $1.0 million or $10.0 million or $100.0 million depending on how aggressively it is pursued. The ROI at each of these levels and all the points in between would need to be calculated, a much more complex undertaking.

In a recent Reveries survey of more than 200 marketing executives, 19% said that the financial services category is the most difficult to measure, followed by entertainment (18%), packaged goods (14%), pharmaceuticals and apparel (9% each) and consumer electronics. In other words, all of them!

3. Given these problems, is it even possible to prove the benefit of brand building activities through financial analysis?

If it’s not, there isn’t much of a future for brand building activities! The purpose of marketing is to create competitive advantage by creating value in the mind of the customer. For most companies, this can and has been measured through market share, operating margins and sales as well as more direct customer-based measures of “brand equity”. If they know what was spent to create that advantage, then in theory a return can be calculated, at least at a relatively high level.

Fortunately marketing’s value is not the issue. The purpose of ROI analysis is less about proving whether brand building activities are worthwhile and more about ensuring that marketing investments are being made as prudently as possible to maximize customer loyalty and profitability. The difficulty is that at least so far no one has found the magic bullet for relating changes in brand equity to changes in revenue for the brand.

For many companies, Lord Leverhulme’s lament “Half the money I spend on advertising wasted. The trouble is I don’t know which half” is as true today as it was in 100 years ago, but not for lack of trying. The problem has been lack of clarity around what constitutes marketing’s impact. With no real consensus on this point, each company has had decide for itself what are the relevant outcomes, proxies and hard measures.

Tim Ambler, in his book “Marketing and the Bottom Line” demonstrated that even within companies there is often a contradiction between what is measured and what is considered important to measure.

Indeed, until recently, it wasn’t thought that there could even be universal standards that worked across companies. Leading brand strategy and IMC thinkers such as David Aaker, Kevin Keller and Don Schultz have all advocated unique approaches to measuring brand equity tailored to each company’s needs. Individual ad agencies have contributed to the fray by advocating their own proprietary solutions and approaches such as Y&R’s Brand Asset Valuator.

Another significant obstacle is that marketing budget recommendations and allocation decisions are often driven by marcom managers who have not traditionally been expected to have rigorous financial or statistical training. These managers also tend to be less well-versed in strategic processes that have permeated other areas of the organization such as Six Sigma, Strategy Maps, Balanced Scorecards and the like. So while concepts of net present value, risk hurdle rates and ROI have always been available to marketers, few have had the skills or patience to adapt them for marketing. This too, is changing.

4. What are the emerging industry standards for measurement of ROI? Are we beginning to see agreement?

The dialog around ROI has only begun to solidify into a body of knowledge in the past two to three years. A handful of marketers such as working at the most sophisticated marketing companies such as James Lenskold, Guy Powell and Tim Ambler have led the way in putting forward what may eventually become a common understanding for discussing the purposes of marketing and the language of ROMI in the same way that Kaplan & Norton’s Balanced Scorecard has provided a common language for strategic planning.

While there are differences between what these thought leaders are saying, there are several principles upon which they all agree. For starters, they agree that ROMI should be approached using the same formula as ROI for other investments, namely,

ROI = (Gross Margin – Marketing Investment)/ Marketing Investment.

Guy Powell in his book, “Return on Marketing Investment”, defines ROMI as “the revenue (or margin) generated by a marketing program divided by the cost of that program at a given risk level. If a relatively low risk-marketing program costs $1M and generates $5M in new revenue, that program has a ROMI of 5.0.

Other points of agreement beyond this basic definition include:

• Gross margin should be discounted to reflect the NPV of the profit.• Gross margin should reflect only the incremental profit associated with the program. • ROMI projections should be used not just after the fact but prior to making investment decisions. This also requires factoring in a “threshold” or hurdle rate to reflect the risk associated with the investment. • ROI measures should be applied both at the individual program level and at more aggregated levels.

Beyond these basics, it gets complicated very quickly. Decisions must be made about what is included and not included in the gross margin, how to measure incremental profit (immediate profit? customer lifetime value?), what cash discount factors to apply, how to allocate expenses, and more. Most of the answers to these questions will vary by company.

Then there is the whole issue of the reliability of future projections of profits. Unless a company has accurate historical data from modeling or controlled experimentation, knowing the likely impact of a program on customer acquisition, retention, sales and profits can be a real sticking point to development of a comprehensive ROI driven approach to making marketing decisions

5. Given its complexity, how many companies are really committed to full implementation of state of the art concepts of ROI?

We are still in the very earliest stages of ROI measurement and practice. The most basic ROMI approaches start at a more ad hoc program level and advance to a fully integrated picture of how various marketing programs and activities work together to influence profitability. Most companies are just starting to get a grip on it. In a recent Reveries study (2003), 72% of the 200 marketing executives surveyed indicated that they lack the necessary data to assess the return on their marketing investments. Sixteen percent said that they rely on sales data alone, while another 22% said they use some form of research such as focus groups, syndicated sales data analysis, brand awareness studies or competitive benchmarking.

A handful of companies are operating at the highest level of sophistication. Although AT&T, P&G, Kraft, Nestle, J&J and others claim to have made extraordinary strides in understanding the financial impact of their marketing programs. According to an Ad Age article, P&G changed how it spent more than one tenth of its $4.3 billion global marketing budget based on marketing mix modeling. Yet even these corporate pioneers believe there is still more work ahead.

An excellent article by Patrick LaPointe at www.marketingnpv.com called The Ladder of Insights suggests that there are five levels, beginning with sales tracking, test markets and market research (1), progressing to program level ROI (2) and resource allocation optimization (3). As the previous quote suggests, quite a few companies have made progress to level 3. At this level, application is focused on getting the mix right, determining how much of the budget should be allocated to ethnic programs vs. more mainstream marketing, interactive and direct mail vs. “softer” marketing approaches designed to build emotional bridges to customers.

Marketing mix modeling and optimization are becoming more widespread at both agencies and clients. For instance, Mullen, an Interpublic Agency in Massachusetts has developed a proprietary tool for predicting the individual and combined impact of various traditional and nontraditional media mix alternatives.

Beyond this point, the air gets a bit rarer. While the first three levels are still somewhat “granular” in that the goal is to evaluate the relative ROI performance of different marketing elements. In contrast, Levels 4 and 5 are more focused on the Total ROI efficiency of the marketing budget as a whole.

Level 4 is characterized by “a consistent approach that provides reliable correlations between market metrics and financial value” with careful attention to the reliability of those projections and consequent risk-adjustments when assessing past and potential projects. Level 5 goes even beyond this high standard by planning and measuring all marketing activities in an integrated framework that incorporates short run and long term return. This approach links into other corporate strategy effectiveness metrics such as the Balanced Scorecard or the more financially driven Economic Value Added measures (EVA). At this level, management compensation is tied to the delivery of goals.

6. What kind of data, personnel, software and skills are required to implement a comprehensive ROI driven approach to improving marketing efficiency? What is the “ROI” on that kind of investment?

Even this preliminary and basic discussion should make clear that development of ROI measures is not something that can be developed lightly or in one’s spare time. It requires substantial commitment to data gathering and analysis. Most practitioners of sophisticated ROMI business practices employ consultants or internal staff familiar with modeling techniques and finance. Unless a company has extensive data gathering and analytics capability, getting started will require a substantial upfront investment and some new skill sets. It requires top management commitment, and a long horizon.

The data suggests that the results are well-worth the effort.

• In his book, The Loyalty Effect, Frederick Reichheld famously sparked the growth of the entire CRM industry with the observation that “companies can boost profits by almost 100% by retaining just 5% more of their customers”. • The American Productivity and Quality Center (APQC) in conjunction with the ARF published a best practices report, Maximizing Marketing ROI, which showed that companies gain a competitive advantage and increased profitability through the application of marketing ROI measurements and modeling. • As noted above, P&G used marketing mix modeling last year to change how it spent more than 10% of its reported global outlay.• Clorox used marketing mix modeling to justify shifting funds from advertising to promotion for Kingsford charcoal and Clorox bleach, moves that reportedly saved Clorox an estimated $65 million on wasteful trade promotions.

Aside from quantifiable results, having a language, a process and scorecard of metrics for managing ROMI can have a strong pay off in elevating the dialog and aligning decisions about what investments will have the greatest impact on revenue and financial performance over time. Using an ROI based approach to marketing decisions can help bridge the disconnect that often exists between marketer and other business professionals. While marketing professionals have tended to speak in terms of brand equity, impressions, clicks, GRP’S and CPM’s, everyone can now share a language of revenue, customer employee loyalty, shareholder value and profitability.

More important, solid metrics and processes allow businesses to confidently make fact based decisions on what are the right levels of investment and how those investments should be allocated across marketing programs to achieve their objectives. After all it has been famously observed, “what is measured is managed”. With ROI based approaches to marketing, the focus is on measuring and managing what is strategically important to the company.

7. How do I determine what are the right measures and approach for my company? Where should I concentrate, at the campaign, customer or corporate level?

The first step is to determine the appropriate unit to measure. In the past this was defined as the “product brand”, but increasingly, this has become the company because few “products” are marketed as stand alone brands anymore. In fact, it can be argued that today, all brands are “service brands” because the economies endorser brands have led to families of products and services all built upon a common brand experience platform.

The second step is to categorize measures according to the degree to which they are describe marketing activity, an impact or an end result of marketing. This is not always easy, as some end results contribute to higher levels of results. For example, is brand awareness a contributor or a result of marketing effectiveness?

In fact there are roughly 3 tiers of activity, activities, impacts and value. James Lenskold describes the hierarchy this way, (from James Lenskold, Marketing ROI: Playing to Win,” Marketing Management, Vol II, Number 3, May/June 2002)

While this model is especially useful in thinking about the lower tiers, it may not go far enough in elaborating the value of marketing at the top levels. The focus on profitability is important but should not be used exclusively. Also important are such measures as the impact the value of the corporate franchise, stock market performance and other more “latent” brand strength indicators.

8. What types of analyses are required to understand the relationships between different metrics?

Just gathering the information is a worthwhile first step, but the data is most useful when relationships between the tiers can be identified and even quantified. This step will require development of models or even controlled experiments.

Marketing mix analytics is use for for relating marketing activities to impact. These analytic techniques have been around for decades, but their use has only recently become more widespread. According to Ad Age (3/29/04), P&G used marketing mix modeling last year to change how it spent more than $00 million of its marketing budget or nearly a tenth of its $4.3 Billion reported global outlaw. Clorox this year used modeling to justify shifting millions from advertising to promotion. Controlled market experimentation has also gained more of a foothold with the advent of new tools and technologies for micromarketing and in-store experimentation.

Likewise the relationship between marketing programs and customer equity can also be explored over time through modeling. CVA measurement, longitudinal tracking other measures can be related to consumer satisfaction and loyalty. The key to the success of these efforts is to use the attitudinal data to predict changes in behavior rather than simply treat them as ends in themselves.

Lastly, the relationship between the cumulative impact of marketing programs over time and franchise value has been successfully explored by such brand valuation techniques as Y&R’s BAM, Interbrands Brand Valuator, CoreBrand’s and Equitrends.

Note that as one moves up the hierarchy, the time frame for understanding the relationships between levels lengthens. The time frame for understanding causality between elements of a marketing program and its overall impact may be as short as a few months while that of understanding the relationship between customer equity and franchise value may require the perspective of several years or even decades. It is important to understand the relevant time frames for estimating impacts as many programs can be expected to have lagged effects.

In developing measures, it is important to recognize that it is better to have a few meaningful measures than a lot of less meaningful ones. Proliferation of new measures rarely leads to better insights. Kaplan and Norton, note that companies rarely suffer by having too few measures; more commonly they keep adding measures whenever an employee or a consultant makes a worthwhile suggestion.

In getting started, focus on a few of what are believed to be some of the main marketing drivers of your business that you have ready data to measure. These may be sales staffing, conversion rates, customer service indices, or communications measures such as web site hits. Make a distinction between what are the inputs or predictors and the outcomes. Over time, track the relationships between these factors. To determine the relationships between them. Then use those relationships to drive future programs.

We have a deep commitment to a brand strategy and an integrated approach to marketing communications. What is the relation between brand strategy and ROI? Brand strategy is an expression of how the company will create value for the customers. Brand strategies manifest themselves in product innovations, graphic design, store layout, customer service policies, and many other components of the “brand experience”. By aligning customer-facing activity around this idea, a company can prioritize its efforts and make more effective decisions across all of its business functions, including but not limited to marketing.

By definition, having a brand strategy in place is fundamental to realizing marketing ROI. However, a brand strategy does not necessarily imply specific measures or programs. Its efficacy can only be inferred by the efficacy of its implementation across a variety of programs and efforts.

Integrated Marketing Communications is the way that companies coordinate the communications aspects of a brand strategy for greater efficiency. IMC is also a strategy, an idea around which decisions can be prioritized and aligned. A plan for an IMC program outlines the specific methods by which this idea or strategy will be implemented. Once specific plans are articulated, it is appropriate and even imperative to develop corresponding metrics for measuring their impact, at the activity level if possible, and certainly at the program level.

Unfortunately, the concept of ROI has become intertwined with IMC to such an extent that it is difficult to separate the two the extent that discussing the ROI of IMC has become nearly synonymous with discussing ROMI. In fact, the responsibility for measuring ROI should be separate from IMC, and considered from the brand level.

9. Who should be responsible for making Marketing more accountable within the organization? Is there an optimal organizational structure?

As with most strategic initiatives, support for building and sustaining the culture of “analysis” required to implement a comprehensive ROI program starts at the top. At the beginning, immediate responsibility for gathering and analyzing the numbers should start with a specially designated person or committee within the Marketing department itself. Over time responsibility should extend beyond marketing to include business managers in other customer facing functions such as customer service, IT and sales. The more participation from Finance, the more likely that the system will be embraced and have an impact on strategic business decision-making.

10.What is the relationship of ROI to the Balanced Scorecard or other corporate strategy planning tools?

Integrating ROI measures with other Balanced Scorecard measures is essential to ensuring that marketing is aligned with other functions in furthering corporate goals. The Balanced Scorecard with its emphasis on financial as well as non-financial measures, ensures that a broad measurement system is put in place that ties directly to corporate strategy.

If a company already has a balanced scorecard or other planning system in place, including ROI measures is not difficult to accomplish. If not, the implementation of an ROMI measurement system affords an ideal opportunity to articulate corporate goals in terms of key metrics.

Wednesday, April 18, 2007

Word of mouth influence is older than the apostles, but the advent of the Internet has taken it to new levels. Of the 24% of adult consumers who say they ‘regularly’ make online purchases, twice as many say they ‘regularly’ seek advice from others before buying than adults who never or occasionally purchase online.

Peer-to-peer communication is most influential to consumers’ decisions across the seven product categories (Car/Truck, Electronics, Apparel/Clothing, Groceries, Medicine, Telecom and Eating Out) that were measured in nearly every age group, but it was especially true of younger people, many of whom belong to one or more social networks such as Facebook, Blackbook2, Myspace or Xanga. Research shows that 18-34 consumers are especially influenced by the opinions of their friends in the categories of ‘electronics’ and ‘eating out’. Friends or social networks for those 18-24 are even more pronounced with over 50% of purchases influence the figures.

The Viral Bandwagon:With figures like these, it is little wonder that online and offline marketers are racing to build a marketing infrastructure and measurement systems to enable more effective word of mouth marketing campaigns. Everyone from Rupert Murdoch’s NewsCorp to Carnival Cruises is building – or buying -- a social network. According to Emarketer, 43% of marketers are planning to use a word of mouth marketing campaign within the next 6 months.

But What Do Consumers Want To Talk About? According to Blogpulse (Nielsen Buzzmetrics), only a fraction of the online conversations concern brands and products. This raises the question, ‘how can marketers consistently give consumers the tools for initiating dialogs that influence brand standing and sales?’ Do we, as marketers really know how to translate brand strategies into ‘viral’ messages?

Traditional market research is not a lot of help in this new “Viral" world. Consider for a moment that the basic tools of market research are about as foreign to social marketing as corporate procurement is to EBay. - Recruit random samples of strangers - Put them in an artificial environments - Ask them to reacte to marketer devised creative ideas or worse, ‘concept statements’ - Control the dialog with little ability to capture consumer language or emotion - Allow little respondent interaction

Identifying "Viral" Potential:Social marketing (influence Pillars) is about understanding what consumers find worthy of talking to others about in the environment where those conversations take place – social networks. Social Pillars include music, clothing, sports, culture, etc.

Working in partnership with an existing networks, identifying respondents by their interests and viewing conversations so you can identify which ideas have the greatest ‘viral’ potential.

It Starts With A Community:Brands that already have an online community are natural candidates for using the Social Marketing to gain insights about how consumers interact – or would like to interact – to spread the word about the brands they love.

We have identified thousands of brand communities within its network covering a wide range of brands and topics, everything from Apple to Kraft Easy Mac to soap operas. For instance, with no marketing effort at all, 650 communities have sprung up to share experiences about Jeep alone! There are nearly 20,000 people who initiated or joined a group with the word ‘soap opera’ in the name.

There are numbers of Urban boards that have been responsible for the start of "Viral" communications for brands. Starbury Sneakers success is due to these boards. Understand - Brand (sales) success starts in Urban communities and spreads to suburban communities. Hush Puppies is another great example of the power of Urban "Trend Setters" and "Influencers".

Companies that have started a customer or consumer panel are in an especially good position to explore opportunities for viral marketing. For example, Sam’s Club has built a panel of small business members who are eager to connect with similar like-minded business people. However, any online community can provide a starting point.

Blurring The Line Between Research And Marketing:Researchers have always known that the mere act of asking a question influences the response. Social Network Marketing takes this basic insight and leverages it to not only gain insights, but to influence the network. By studying which ideas stimulate brand conversations, marketers will be better able to consistently identify the most powerful viral ideas. Consumers want to talk about brands and products. Now marketers have a way of learning how to influence the process.

Wednesday, April 04, 2007

There is a recent case study that demonstrates the speed of Urban viral marketing without the use of mass marketing. General Market agencies will hide this case study because it demonstrates dramatic sales succes without spending a large advertising budget. The case study is Starbury Sneakers:

Early 06: Stephon Marbury cuts deal with Steve and Barry’s to help market high quality $15 basketball sneakers.

Early August 8/3-8/17, 06: Starbury sneakers start getting posted up on Topix, Slam, Yard Barker, VBulliten and a variety of Urban Youth boards.

August 17, 06: Starbury Sneakers start to hit stores (with no advertising) only viral PR. (See story below about the lines at the stores. NPR reported people leaving their homes at 5AM to wait on lines.

August 17, 06: Starbury Sneakers are up on EBAY

August 16-30, 06: General market communications vehicles finally “Open their Eyes” and see what they have missed. The Starbury Sneakers story runs on NPR, Slate, ESPN, NY Times, Christian Science Monitor, etc.

August 29, 06: My son gets a viral email from friends on his phone about Starbury sneakers

September 1, 06: My son, a 13 year old Anglo male in Florida (who does not play basketball) asks me for a pair of Starbury sneakers. I ask: What are they? and did some research.

April 5, 07: General market TV (NBC) does a story on Stephon Marbury and the success of Starbury Sneakers. NBA star sells $15 sneakers - New York Knicks star Stephon Marbury makes sneakers affordable.

http://today.msnbc.msn.com/id/17962620/from/ET/

Starbury sneakers took about 45 days to reach my son…that is how fast Urban Mindset Viral marketing is (without traditional media vehicles). The success vehicles for Starbury sneakers were one-on-one marketing, urban bulletins and viral PR driving $7 million in sales the first week. I had to drive to Orlando from Ft. Lauderdale to purchase Starbury sneakers for my son.

Who developed and executed this initiative? The Mastermind Group (New York) - http://www.themastermindgroup.com

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Here is what was posted on the message boards:Stephon Marbury to release $15 Starbury Sneakers

Saw the interview he had n he was sayin how they are the same quality as other basketball sneakers but affordable.

1st off ..... if thats true than the sneaker industry is is fuckin us over

2nd ..... i think its a great idea for him to do this cause he's looked up to in NY especially n thatll save parents and kids money ...... i know i always wanted jordans n whatnot n never fuckin got em

with that said tho i just cant see them bein nice n for some reason idk if i could rock sneakers for 14.99 ..

drop ya thoughts ....

PRESS and Background:

Thursday, August 17th, 2006

Starbury’s Sale

in Uncategorized, kicks, The Links by Lang Whitaker, NBA

by Lang Whitaker

Last night I wrote a post about the launch party for Stephon Marbury’s new line of budget sportswear and shoes. You guys did a lot of talking about it, too, and while we all agreed that it was great that Stephon was trying to do something different, I was curious how well the shoes would sell. Because to be honest, sometimes the only reason people buy shoes is because they are expensive. While what Stephon is trying to do — making shoes and clothes that have quality but are actually affordable — is fantastic. But would anyone actually buy the stuff?

Well, I just got word that when the Steve and Barry’s store in Manhattan Mall opened this morning, there were about 500 people in line outside the store. The people came charging in when the doors opened, and the store completely sold out of Steph’s shoes. Really. They were bringing in shoes from the back, people kept coming in to get their kicks, and even the actual Steve and Barry were having to work the registers to help get people through there.

The only downside is that because of the low price-point, the store only made $7 profit. Kidding!!

For real, that scene wasn’t only in Manhattan. Stores in Kansas and Michigan had similar runs on the Starbury shoes, and I was told that nobody’s exactly sure how well they did at the other Steve and Barry’s stores because all of their stores were so much busier than they thought they would be that by this afternoon they hadn’t had a chance to tally things up and see where they stood just yet.

I know it’s been less than one day, but if this stuff I’m hearing is true (and I have no reason not to believe it), then I wonder what all this means in the longer run? Is there a real, hungry market there for low-priced shoes? Shaq’s the only current player (respect to Hakeem for trying it years ago) who’s tried something similar, but his went for $40. For that price, you could buy two pairs of Starbury shoes.

Knicks' Marbury Launches Cheap Sneaker Line by Anne Hawke

Stephon Marbury unveils his new $15 sneakers in New York City, Aug. 16, 2006. AP

Morning Edition, August 31, 2006 · Prickly. Self-centered. Overpaid. These are some adjectives that have been used to describe New York Knicks point guard Stephon Marbury over the years.

But Marbury's latest off-court mission -- to share the love, as he says -- might just earn him comparisons to philanthropists and civil rights pioneers.

In a world of multi-million dollar shoe endorsements by NBA players, Marbury is sponsoring low-cost athletic wear and a $15 basketball shoe.

NEW YORK -- Want to be like Steph? Well, it won't cost you much.

Stephon Marbury now is endorsing a sneaker that costs just $14.98, a pittance when compared with the often daunting prices that companies such as Nike and Reebok charge for their footwear.

Marbury makes sure ballers don't have to be 'ballers' to rock his footwear. (AP) The "Starbury One," a sneaker designed by Steve & Barry's University Sportswear, will go on sale Thursday.

The New York Knicks guard hooked up with the low-priced apparel company after Marbury's marketing representatives spoke with Steve & Barry's about other marketing opportunities. When Marbury heard about the company's sneakers, he quickly agreed to endorse them.

He is expected to wear the sneakers during games next season.

"We got to know Stephon the man vs. Stephon the basketball player that we read about and saw on television, and we immediately saw how passionate he was about this vision," said Howard Schacter, Steve & Barry's chief partnership officer. "We also came to quickly learn he has a credibility, a street credibility."

Claude Lévi-Strauss, a structural anthropologist who described the purpose of myth as 'provid[ing] a logical model capable of overcoming a contradiction.' Contradictions stem from opposing structural relations, made up of universal binaries, which Lévi-Strauss considered to be universal concerns of all cultures.

One of the first people to apply Lévi-Strauss' thinking to the branding world (commercially at least) were the UK marketing semioticians Ginny Valentine and Monty Alexander, who started using the myth quadrant around the early nineties. This is basically where two binaries - that have high structural relevance to the category - are paired off against each other to generate two 'cultural norms' and two 'cultural contradictions'. The two cultural contradictions provide an opportunity for brands to engineer a resolution that has the potential to transform the category. Here's the model brought to life based on the fundamental structure of female beauty, featuring the ever-popular blog case study, Dove ...

Various explanations have been offered for the success of Dove, but I'd argue that this is one of the more powerful ones given that Dove is ultimately resolving the modern day contradiction of female beauty - attractiveness with 'real' curves, in larger sizes etc. The irony of course, is that Dove's images are still not a 'real' depiction of female beauty as such, since they remain an aspirational ideal for many 'everyday women'. On browsing through a selection of ads for this example generally, it was quite disturbing just how few ads use 'everyday women', other than insurance, anti-smoking and other government-led campaigns.

That said, it's certainly a more motivating and realistic goal for most women compared with all other cosmetic and beauty communications, which only draw on 'unreal(istic) beauty'. Dove broke the mould, and the rest, as they say, is history. I can't say that I know how the insight really emerged, possibly from a stream of insecure, fed-up women in focus groups and interviews. Be that as it may, this insight turns out to be a glaring opportunity once we turn our attention to locating modern female beauty within culture.

I would also like to turn briefly to another case study favourite, Persil's 'Dirt is Good'. I don't wish to debate whether the campaign's really working for Unilever in financial terms here (this has already been discussed at length elsewhere), only to show that it's really a simple semiotic inversion strategy at heart ...

Admittedly the examples that I've used here are a little crude to serve the model's structuralist ends, so please, no hate mail or spam for suggesting that everyday women are unattractive - hopefully you get the point! It's also worth noting a number of theoretical limitations. To start, it offers a snapshot of a reality at a fixed moment in time; it does not account for the instability and historical specificity of cultural meanings over time e.g. during the Victorian period in England appreciation of 'real beauty' was the dominant norm by far. Nor are the contradictions necessarily applicable cross-culturally. Beyond this, it is also fair to challenge the very notion that universal binaries structure culture, as not only does the model account for a limited set of structural relations at any one time, but it strips away, and is unable to cope with, the sheer cultural complexity of everday life. Although I subscribe to these (poststructuralist) criticisms theoretically speaking, when it comes to the 'practical crunch' these limitations are less problematic, and it still remains one of the more powerful semiotic-type tools around.

A more nuanced cultural reading of female beauty ideals in the West might reveal how they are changing over time, broadly inline with global and local fashion, film, music, and other significant culture/media industries. The cultural resonance and success of Dove's campaign for 'real beauty' for example, is also due in part to the broader naturalness tsunami that is sweeping across everything from food and healthcare to holidays and architecture. The root cause of which is a backlash against the philosophy of scientific progress to a large extent, and the detrimental environmental and societal effects it’s being blamed for. This also includes a cultural backlash against cosmetic surgery (despite its increasing popularity), airbrushed pictures, perfect models, celebrities and the like (think Getty Images vs Flickr). But it's important to keep in mind a sense of cultural relativism at this point. Dove is only 'real' because the rest of the beauty industry is so 'unreal'. And with the exposure and influence of people generated content rapidly increasing, I suspect the real 'real beauty' resolution has only just stepped off the catwalk.

Online activity among emerging majorities consumers continues to grow at a rapid pace. The percentage of Latino Americans, with access to the Internet, (whether from home, school, job, or other access point), increased from 43% in January 2002 to 69% in January 2006. More than 20 million U.S. Latinos are online. Forrester Research, in Cambridge, Mass., found Latinos are active in online banking, and a Roslow Research Group study reported that 70% of U.S. Latinos said that they would use the web to research a car purchase.

Research can be used to find those influential Web users and what they want to see. The web can also be effective on younger ethnic consumers by simply entertaining and engaging them with authentic and organic aspects of their culture, primarily the latest trends in music, fashion, and technology.

A study by AOL/Roper ASW shows that almost 20 million Hispanics in the US are online. While this is already an impressive number, the growth rate is even more impressive. About 20% of online Hispanics had connected their households to the Internet less than six months earlier. More than half who were not yet online expected to connect within the next two years.

In addition, the detailed survey found that Hispanic online consumers have quickly made the Internet part of their everyday lives. They go online at home an average of 9.2 hours a week, for example, compared with 8.5 hours for the general online population and they now heavily rely on the Internet to learn more about products, to share opinions, and to improve their lives. In fact, 70% now view the Internet as the best source for comparing prices, making it the most powerful information medium for influencing online Hispanics throughout the purchase decision process.

The Hispanic community is online in large numbers, and it's happening right now. So far, Hispanics feel there is a lack of online content and advertising available in Spanish. Although it is true that many Hispanics speak English fluently, at least half prefer to read content in their native language, according to comScore Media Metrix.

A lot of big clients are hiring smaller agencies to handle their business because of the speed and lack of red tape they offer. Large agencies that are owned by holding companies are surely feeling the effects of this shift of perspective. MMB in Boston picked up Subway when they fired Omnicom Group agency Goodby Silverstein. How did MMB land Subway? They were already working for Subway on a project basis. This is not a trend it is the way things will be working from now on. Even large advertisers are beginning to avoid the monster that has been created in our industry by the conglomerate holding companies. Advertising just doesn’t work well when fashioned like its GM. Come to think of it, GM doesn’t work so well that way either.

The fact that clients are recognizing that smaller is better will probably overhaul the way large agencies do things. Clients today are looking for nimble, focused service. They expect the senior management of their agency to work on their business. They are willing to walk away the perceived security of the behemoth agency to get it.

Small agencies are thinking smarter and more strategically than the larger agencies. As a result, big agencies are slipping into playing the role of the ‘middle man’ and some forward thinking clients are skipping them all together and going straight to the source for new ideas.

Corporately held agencies are being seen as an older model these days that are not as effective as it was believed size could make it. From a creative point of view they haven’t helped our industry do better work either. The trend of clients moving to smaller agencies can be a very good thing for advertising’s creativity. The large agencies are not going to sit still and let significant pieces of business walk away for long. One day they will become more focused on the work and less on their corporate approval process and meeting revenue demands of the mother ship.

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